Concerns about the international economy and negative consumer sentiment have translated into reduced demand and a lower median.
This serves as another reminder that the state of the housing market is directly linked to the health of the economy. Despite evidence that the local economy continues to outperform many of our trading partners, we are now experiencing a soft housing market.
The 2.8 per cent reduction on the revised median house price largely reverses the small gains of the June quarter and confirms that, overall, there has been very little capital growth over the past 12 months.
The median house price in Melbourne has dropped by 2.8 per cent from $567,500 (revised) in the June quarter. The result was similar in the unit and apartment market, where the median dropped by 2.3 per cent from $467,000 (revised) to $465,500.
The recent trend of reduced demand in the more expensive segments of the market has continued. The effects of the surge in population between 2005 and 2010 are still bolstering demand in the more affordable suburbs.
Across Melbourne this means that the outer suburbs have recorded an overall better result than the inner ones have.
The list of suburbs recording positive growth over the quarter and on an annual basis is dominated by those priced at or below the median: for instance, Deer Park has recorded the strongest growth of all suburbs over the past year. Positive growth over the year has also been recorded in Wyndham Vale, Sunbury, Caroline Springs, Berwick, Hawthorn and Balwyn.
Demand in regional Victoria has largely mirrored that in Melbourne, with the median price of a house dropping by 3.1 per cent to $310,000 from $320,000 in the June quarter.
Of the main regional centres, Geelong has recorded a very healthy increase of 5.7 per cent to a median house price of $390,000. In Ballarat prices were stable, with the median of $285,000, and in Bendigo there was a 2.6 per cent reduction to $277,500.
The lesson from the GFC, when the median fell by 14 per cent, is that the market will remain subdued until confidence improves in the economy or there is stimulus in the form of lower interest rates.